Greece’s economy is set to shrink by 9% this year instead of 9.7% as estimated two months ago, the European Commission said in its Summer Forecast, published on Tuesday, adding the rebound in 2021 will also be smaller than estimated in its Spring Forecast, at 6% of gross domestic product instead of 7.9%.
“The full economic effect of the containment measures is expected to have materialized in the second quarter with a strong decline in domestic demand and exports. As social distancing measures are gradually relaxed, economic activity is expected to start recovering, leading to a partial recovery of domestic demand. The swift implementation of fiscal measures amounting to about 9.5% of GDP to counteract the economic impact of the pandemic should cushion domestic demand to some extent. It is also expected to help prevent hysteresis effects in the labor market as well as widespread bankruptcies. Real GDP is expected to decline by 9% in 2020 and to increase by 6% in 2021,” the commission said in its report.
In contrast, the European Commission forecasts France, Italy, Spain and Portugal will seeing a sharper contraction of GDP that estimated two months ago, at rate of 10.6% (against 8.2% forecast in May), 11.2% (from 9.5%), 10.9% (from 9.4%) and 10% (from 6.8% in May).
Their growth rates have also been revised downward, with the exception of France, whose growth is seen at 7.6%, just a bit higher than May’s forecast of 7.4%. Italy’s rebound in 2021 is not expected to exceed 6.1% (against 6.5% in May), while the difference is also slight for Spain at 7.1% from May’s forecast of 7%.
In the eurozone as a whole, the European Commission warns of a deeper-than-expected recession at 8.7% against is spring forecast of 7.7%, with a slightly less dynamic rebound in 2021 of 6.1% against 6.3%. The European Union’s economy is expected to end the year with a contraction of 8.3% (from 7.4% in May), with its growth rate next year coming to 5.8% instead of 6.1% as forecast in May.